Nexstar Media Group is a telecommunications company with a portfolio of 171 TV stations located throughout the US. Most of the stations are affiliates with the four "major" U.S. television networks and located in small to medium-sized markets. In addition, it operates all of the stations owned by an affiliated company, Mission Broadcasting, under local marketing agreements.
Nexstar Media Group, Inc. operates as a television broadcasting and digital media company in the United States. It focuses on the acquisition, development, and operation of television stations and interactive community Websites in medium-sized markets. The company offers free over-the-air programming to television viewing audiences. It also provides sales, programming, and other services through various local service agreements to 25 television stations and 5 power television stations owned and/or operated by independent third parties. As of December 31, 2015, the company owned, operated, programmed, or provided sales and other services to 99 television stations in 61 markets in the states of Alabama, Arizona, Arkansas, California, Colorado, Florida, Illinois, Indiana, Iowa, Louisiana, Maryland, Michigan, Missouri, Montana, Nevada, New York, Pennsylvania, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia, and Wisconsin. The company's stations reach approximately 20.4 million viewers. Nexstar Broadcasting Group, Inc. was founded in 1996 and is headquartered in Irving, Texas.
(Summary) (Company) (Chart)
29 January 2016
1yr Target $70.83
Payout Ratio 30.86%
1yr Cap Gain 11.28%
1yr Tot Return 12.78%
EPS (ttm) $3.11
EPS next yr $3.81
Forward P/E 16.71
EPS next 5yr 6.50%
1yr Price Support $24.76
Market Cap $1.97 Bil
Revenues $1.04 Bil
Earnings $98.20 Mil
Profit Margin 9.42%
Quick Ratio 1.60
Current Ratio 1.60
1yr RevGR 41.98%
3yr RevGR 32.89%
5yr RevGR 23.39%
1yr EarnGR 19.80%
3yr EarnGR -25.65%
5yr EarnGR ---
1yr DivGR 25.00%
3yr DivGR 25.70%
4yr* DivGR 25.74%
Nexstar Broadcasting (NXST) declared a $0.30/share quarterly dividend which is a 25% increase from its prior dividend of $0.24. The forward yield is 1.9% and payable on Feb. 24 for shareholders of record Feb. 10. The ex-dividend date is Feb. 8.
Nexstar Media Group is a television broadcasting and digital media company focused exclusively on the acquisition, development and operation of television stations and interactive community websites in medium-sized markets in the United States.
As of December 31, 2015, the company owned, operated, programmed or provided sales and other services to 99 full power television stations, including those owned by Variable Interest Entities (VIE) with which they have local service agreements, in 61 markets in the states of Alabama, Arizona, Arkansas, California, Colorado, Florida, Illinois, Indiana, Iowa, Louisiana, Maryland, Michigan, Missouri, Montana, Nevada, New York, Pennsylvania, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia and Wisconsin. The stations are affiliates of ABC, NBC, FOX, CBS, The CW, MyNetworkTV and other broadcast television networks. The stations reach approximately 20.4 million viewers or 18.0% of all U.S. television households.
Nexstar Media concentrates on medium-sized markets because they believe those markets offer significant advantages over large-sized markets. First, because there are fewer well-capitalized acquirers with a medium-market focus, Nexstar has been successful in purchasing stations on more favorable terms than acquirers of large market stations. Second, in the majority of their markets only four to six local commercial television stations exist. As a result, the company achieves lower programming costs than stations in larger markets because the supply of quality programming exceeds the demand.
The stations Nexstar owns and operates or provides services to provide free over-the-air programming to their markets’ television viewing audiences. This programming includes (a) programs produced by networks with which the stations are affiliated; (b) programs that the stations produce; and (c) first-run and rerun syndicated programs that the stations acquire. The company's primary sources of revenue include the sale of commercial air time on the stations to local and national advertisers, revenues earned from the retransmission consent agreements with cable, satellite and other multichannel video programming distributors (“MVPDs”), and the sale of advertising on websites in each of the broadcast markets.
Nexstar seeks to grow their revenue and operating income by increasing the audience and revenue shares of the stations they own, operate, program or provide sales and other services to, as well as through the growing portfolio of digital products and services. The company also strives to increase the audience share of the stations by creating a strong local broadcasting presence based on highly rated local news, local sports coverage and active community sponsorship. The company seeks to improve revenue share by employing and supporting a high-quality local sales force that leverages the stations’ strong local brands and community presence with local advertisers. They further improve broadcast cash flow by maintaining strict control over operating and programming costs. The benefits achieved through these initiatives are magnified in their duopoly markets by broadcasting the programming of multiple networks, capitalizing on multiple sales forces and achieving an increased level of operational efficiency. As a result of the operational enhancements, Nexstar expects revenue from the stations acquired or providing services to in the last four years to grow faster than that of the company's more mature stations.
The digital media businesses provide digital publishing and content management platforms, a digital video advertising platform and other digital media solutions to media publishers and advertisers. Nexstar is focused on new technologies and growing their portfolio of digital products and services complementary to their vision of providing local news, entertainment and sports content through broadcast and digital platforms.
Nexstar seeks to generate and enhance their revenue and media cash flow growth through the following strategies:
Develop Leading Local Franchises. Each of the stations the company owns, operates, programs, or provides sales and other services to creates a highly recognizable local brand, primarily through the quality of local news programming and community presence. Based on internally generated analysis, Nexstar believes that in over 78.0% of their markets they rank among the top two stations in local news viewership. Strong local news typically generates higher ratings among attractive demographic profiles and enhances audience loyalty, which may result in higher ratings for programs both preceding and following the news. High ratings and strong community identity make the stations that they own, operate, program, or provide sales and other services to more attractive to local advertisers. For the year ended December 31, 2015, Nexstar earned approximately 30% of their advertising revenue from spots aired during local news programming. Currently, their stations provide between 15 and 25 hours per week of local news programming.
Invest in Digital Media. Nexstar is focused on new technologies and growing their portfolio of digital products and services. Their websites provide access to local news and information, as well as community centric business and services. The websites had 115 million unique visitors who utilized over 848 million page views. Also in 2015, the company' mobile platform accounted for 46% of the overall page views by year end.
Emphasize Local Sales. Nexstar employs a high-quality local sales force in each of the markets to increase revenue from local advertisers by capitalizing on investment in local programming and community websites. Additionally, local advertising has historically been a more stable source of revenue than national advertising for television broadcasters. For the year ended December 31, 2015, revenue generated from local advertising represented 70.6% of the company's consolidated spot revenue (total of local and national advertising revenue, excluding political advertising revenue). In most markets, Nexstar has increased the size and quality of their local sales force and invested in their sales efforts by implementing comprehensive training programs and employing a sophisticated inventory tracking system to help maximize advertising rates and the amount of inventory sold in each time period.
Operate Duopoly Markets. Owning or providing services to more than one station in a given market enables the company to broaden their audience share, enhance revenue share and achieve significant operating efficiencies. Duopoly markets broaden audience share by providing programming from multiple networks with different targeted demographics. These markets increase revenue share by capitalizing on multiple sales forces. Additionally, the company achieves significant operating efficiencies by consolidating physical facilities, eliminating redundant management and leveraging capital expenditures between stations. Nexstar derived approximately 70.0% of their net revenue, excluding trade and barter revenue, for the year ended December 31, 2015 from the duopoly markets.
Maintain Strict Cost Controls. Nexstar emphasizes strict controls on operating and programming costs in order to increase broadcast cash flow. The company continually seeks to identify and implement cost savings at each of their stations and the stations they provide services to and their overall size benefits each station with respect to negotiating favorable terms with programming suppliers and other vendors. By leveraging size and corporate management expertise, Nexstar is able to achieve economies of scale by providing programming, financial, sales and marketing support to stations.
Capitalize on Diverse Network Affiliations. Nexstar currently owns, operates, programs, or provides sales and other services to a balanced portfolio of television stations with diverse network affiliations, including ABC, NBC, CBS and FOX affiliated stations which represented approximately 20.0%, 25.0%, 24.0% and 18.0%, respectively, of their 2015 combined local, national and political revenue. The networks provide these stations with quality programming and numerous sporting events such as NBA basketball, Major League baseball, NFL football, NCAA sports, PGA golf and the Olympic Games. Because network programming and ratings change frequently, the diversity of the station portfolio’s network affiliations reduces reliance on the quality of programming from a single network.
Attract and Retain High Quality Management. Nexstar seeks to attract and retain station general managers with proven track records in larger television markets by providing equity incentives not typically offered by other station operators in our markets. Most of the station general managers have been granted stock options and have an average of over 20 years of experience in the television broadcasting industry.
Television station revenue is primarily derived from the sale of local and national advertising. All network-affiliated stations are required to carry advertising sold by their networks which reduces the amount of advertising time available for sale by stations. Nexstar's stations sell the remaining advertising to be inserted in network programming and the advertising in non-network programming, retaining all of the revenue received from these sales. A national syndicated program distributor will often retain a portion of the available advertising time for programming it supplies in exchange for no fees or reduced fees charged to stations for such programming. These programming arrangements are referred to as barter programming.
Advertisers wishing to reach a national audience usually purchase time directly from the networks or advertise nationwide on a case-by-case basis. National advertisers who wish to reach a particular region or local audience often buy advertising time directly from local stations through national advertising sales representative firms. Local businesses purchase advertising time directly from the station’s local sales staff.
Advertising rates are based upon a number of factors, including:
- a program’s popularity among the viewers that an advertiser wishes to target;
- the number of advertisers competing for the available time;
- the size and the demographic composition of the market served by the station;
- the availability of alternative advertising media in the market;
- the effectiveness of the station’s sales force;
- development of projects, features and programs that tie advertiser messages to programming; and
- the level of spending commitment made by the advertiser.
Advertising rates are also determined by a station’s overall ability to attract viewers in its market area, as well as the station’s ability to attract viewers among particular demographic groups that an advertiser may be targeting. Advertising revenue is positively affected by strong local economies. Conversely, declines in advertising budgets of advertisers, particularly in recessionary periods, adversely affect the broadcast industry and, as a result, may contribute to a decrease in the revenue of broadcast television stations.
My Path Forward
This company will fit well into my portfolio along side shares of a few other media companies. The fundamentals look good and a dividend growing at 25% per year is extremely appealing. These are the kinds of numbers I like to see when deciding on whether to accumulates shares of a company. The only thing that bothers me is the 5 year estimated earnings growth rate. It seems a little low but then this company has been grown by acquisition so that number may significantly change over time.
From a technical point of view this company seems to have a lot of support near $50 per share. It also has a beta of 2.22 so there's a possibility that internal volatility will allow me to buy these shares on dips. I'd like to buy shares at a price below $60 per share and would be ecstatic to buy them at $50 per share. So I expect to start a position in this company as soon as there is a pullback in the price of these shares. And looking at the stock chart of the company, this could easily become a nice stock to swing trade also.